november 3, 2017 apollo tyres (apotyr) |...

November 3, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

India business drives performance!

Apollo Tyres’ (ATL) Q2FY18, consolidated revenues grew 12.7% YoY

to | 3,477 crore as India business reported strong growth of 18%

YoY (volume growth of ~10% YoY while the value & product mix

grew 8% YoY). Revenues (adjusting excise duty) from Asia Pacific

Middle East & Africa (APMEA) grew 17.8% YoY to | 2,519 crore while

revenue from Europe increased 1.4% YoY to | 1006 crore

EBITDA margins were at 10.5% (down 373 bps YoY, up 216 bps

QoQ) mainly due to lower raw material cost (gross margin up 230

bps QoQ). Consolidated PAT declined 46.1% YoY to | 140 crore

Standalone revenues increased 19.5% YoY to | 2,481 crore while its

EBITDA margins improved 315 bps QoQ to 11.5%

ATL has raised | 1,500 crore via allotment of 6.3 crore equity share

(resulting in ~12% dilution) at | 238/share on October 10, 2017

According to the management, a demand revival in replacement

market, good OEM sales and imposition of duty on Chinese tyres is

likely to drive its demand while margin is expected to gradually

improve considering stable raw material. The European business is

expected to recover in FY19E both on the demand and margin front

Well placed to benefit from demand revival

ATL is well placed to benefit from the radialisation story in India. It enjoys

25% market share in truck tyre segment (in both TBB & TBR). Increasing

radial capacity; will improve its radial volumes, (phase 1 of radial capacity

has been commissioned in Q4CY16 & with full capacity set to come on

stream in mid-2018), thus driving its growth. According to the

management, strong OEM demand (all categories posted strong growth

in Q2FY18), revival in replacement demand (up ~5% YoY in Q2FY18 vs.

subdued growth in the past) is likely to drives its revenue. Imposition of

anti-dumping duty (ADD) in September 2017 on Chinese tyre has resulted

in 1) lower Chinese import (from 150,000/month pre demonetisation to

~80,000/month and currently at ~70,000/month) and 2) has narrowed the

pricing gap between Chinese & Indian players thereby benefiting

domestic players (specifically market leader like ATL), which will increase

its volumes thereby resulting into higher market share, going forward.

Also, re-stocking of tyre inventory by the dealer is largely done in

Q2FY18. The situation has normalised thus benefiting ATL. Thus, the

management is positive on demand outlook in India, going ahead.

Margin to improve from here on...

According to management, the margins in the previous quarter were

impacted due to high cost raw material procured in the past. However,

with NR prices been stabilized at |130/kg since May 2017, gross margins

are expected to improve from here onwards. The Q2FY18 margin has

improved QoQ & is likely to continue its momentum. The start-up cost in

Hungary will impact margins in the near term. However, they are

expected to significantly recover in FY19E. Further, a better product mix

(higher share of radial tyre) will support margins, going forward.

Decent business case; valuation remains fair!

ATL expects good demand momentum to continue in H2FY18. Margins

are expected to gradually move northwards thereby driving profitability.

We revise our earnings estimates (largely in line with management

guidance) and factor in QIP proceed (resulting in equity dilution), which in

addition to the internal accrual will mostly fund capex in the next two

years. We maintain BUY rating and value the stock at 14x FY19E EPS to

arrive at a target price of | 275.

Rating matrix

Rating : Buy

Target : | 275

Target Period : 12 months

Potential Upside : 16%

What’s Changed?

Target Changed from | 315 to | 275

EPS FY18E Changed from | 17.3 to | 12.2

EPS FY19E Changed from | 24.2 to | 19.6

Rating Unchanged

Quarterly Performance

(| Crore) Q2FY18 Q2FY17 YoY Q1FY18 QoQ

Revenues 3,476.7 3,084.9 12.7 3,282.5 5.9

EBITDA 364.4 438.4 -16.9 273.3 33.4

EBITDA (%) 10.5 14.2 -373 bps 8.3 216 bps

Reported PAT 140.2 260.0 -46.1 88.3 58.8

Key Financials

| Crore FY16 FY17 FY18E FY19E

Net Sales 11,740 13,063 14,082 15,395

EBITDA 1,997.5 1,846.4 1,504.0 2,112.8

Net Profit 1,123.0 1,099.0 696.1 1,123.4

EPS (|) 19.6 19.2 12.2 19.6

Valuation summary

FY16 FY17 FY18E FY19E

P/E (x) 12.4 12.3 19.4 12.0

Tgt P/E (x) 14.0 14.3 22.6 14.0

EV/EBITDA (x) 6.9 8.7 10.4 7.6

P/BV (x) 2.0 1.9 1.5 1.3

RoNW (%) 16.5 15.1 7.5 11.0

RoCE (%) 18.8 13.6 8.4 11.8

Stock data

Particular Amount

Market Capitalization (| Crore) | 13500 Crore

Total Debt (FY17) (| Crore) 3,244.5

Cash & Investments (FY17) (| Crore) 731.4

EV (| Crore) 16,013.4

52 week H/L (|) 288 / 166

Equity capital (| crore) | 50.4 Crore

Face value (|) | 1

Price performance (%)

1M 3M 6M 12M

Apollo Tyres Ltd -3.5 -14.6 -5.2 19.1

JK Tyres -1.2 -14.3 -14.8 1.2

CEAT Ltd -1.5 -12.4 5.8 40.3

MRF Ltd 4.3 -7.2 -3.9 32.6

Balkrishna Industries Ltd 2.8 8.3 13.9 72.1

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]

Apollo Tyres (APOTYR) | 237


Variance analysis- Consolidated

(| crore) Q2FY18E Q2FY18E Q2FY17 YoY (%) Q1FY18 QoQ (%) Comments

Total Operating Income 3,477 3,345 3,085 12.7 3,282 5.9 Revenues grew 12.7% YoY after 1) domestic (India) business grew 18% YoY,

which was further attributable to volume growth of 10% YoY and price &

product mix of 8% YoY. The replacement demand also fared well during the

quarter (up 5% YoY)

Raw Material Expenses 1,983 1,794 1,592 24.6 1,947 1.8 As expected, ATL benefited from lower raw material cost on a QoQ basis,

which expanded the gross margin by 230 bps QoQ

Employee Expenses 490 451 434 13.0 431 13.6

Other expenses 639 686 621 2.9 630 1.4 Lower other expense also supported the margin

EBITDA 364 413 438 -16.9 273 33.4

EBITDA Margin (%) 10.5 12.4 14.2 -373 bps 8.3 216 bps EBITDA margin on a QoQ basis was driven by lower raw material cost &

lower other expense

Depreciation 138 126 106 30.9 126 10.1

Interest 40.2 36.4 26.3 53.0 34 18.1

Other income 19.7 35.7 43.0 -54.1 8.8 125.3 Other income came in much lower than our estimate, further impacting PAT

Tax 65.2 73.1 89.1 -26.8 34 92.9

PAT 140.2 213.7 260.0 -46.1 88.3 58.8 Lower-than-expected margin impacted the PAT

EPS (|) 2.5 4.2 4.5 -46.1 1.5 58.8

Key Metrics

Revenue (| crore)

India 2,519 2,139 17.8 2,585 -2.5 Revenue grew 18% YoY; as volume grew 10% YoY while price & product mix

witnessed growth of 8% YoY in Q2FY18

Europe 1,006 992 1.4 1,016 -1.0 Its European operations volumes declined 5% YoY and underperformed the

industry

EBIT Margin (%)

India 8.4 14.4 -600 bps 4.4 393 bps Margins improved QoQ, in line with management guidance

Europe 1.8 4.7 -285 bps 2.4 -57 bps Higher start up cost and lower utilisation level further impacted margin of its

European operations

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) Old New % Change Old New % Change Comments

Revenue 14,254 14,253 0.0 15,871 15,592 -1.8 We have marginally revised our revenue estimates

EBITDA 1,647 1,504 -8.7 2,114 2,113 -0.1

EBITDA Margin (%) 11.6 10.6 -100 bps 13.3 13.6 23 bps

Lower-than-expected margins in H1FY18 has prompted us to revise FY18

estimates. However,margins are likely to improve in FY19E, which is largely

in line with the management expectations

PAT 866 696 -19.6 1,222 1,123 -8.1 Lower other income and higher depreciation is likely to impact PAT

EPS (|) 17.2 12.2 -29.2 24.2 19.6 -19.0

ATL raised funds via QIP route (issuing 6.3 crore share thereby diluting

equity by 12%) thus resulting into lower EPS vis-a-vis PAT

FY18E FY19E

Source: Company, ICICIdirect.com Research;


Key conference call takeaways

The management is positive on the demand outlook, going forward.

Strong OEM sales, revival in replacement demand and imposition of

anti-dumping duty on Chinese tyre will drive demand in Q3FY18

The management believes the raw material movement has largely

stabilised and expects margins to improve in Q3FY18. However, it

expects some challenge in Q4FY18. The start-up cost of its Hungary

plant will exert some pressure on margins in European operations in

FY18E. However, the same is expected to improve from FY19E

onwards

For Q2FY18, the standalone business (India) grew ~18%, as volume

grew ~10% YoY while the value & product mix grew 8% YoY.

According to the management, in Q2FY18, truck OEM volume grew

~40% YoY while truck replacement grew ~5% YoY. Revenue from

Europe (Dutch and Hungary) was at €107 million (mn) – down 5%

YoY (volume down 5% YoY) underperforming the overall European

industry. Revenue of its distribution business in Europe - Reifencom

was at €27 million (mn) & posted operational loss during the quarter

According to the management, Chinese import fell from

150,000/month pre demonetisation to ~80,000/month and is currently

at ~70,000/month. With the imposition of anti-dumping duty, the

management expects the share of domestic players to increase in the

TB tyre market (ATL well placed to grab the market share) as Chinese

imports are gradually expected to come down, going forward

Capex for FY18 is expected to be | 2,400 crore (of which Chennai

plant would be | 1,000 crore) while for FY19 it is expected to be

| 2100 crore. The capacity expansion is mainly for Hungary

expansion, ramp up of passenger car capacity & completion of

Chennai plant expansion

The share of truck bus radial (TBR) tyre is at >50% for ATL vs.

industry radial share in the range of 45-50%

Its 2-W volumes are up 50% YoY. The company continues to work on

the outsourcing model of 2-W tyres. According to the management,

once 2-W volume significantly picks up, they may think of setting up a

pilot capacity, going forward

Average landed cost for various raw material for Q2FY18 is at – NR at

| 160/kg, synthetic rubber | 130/kg, fabric | 260/kg and carbon black

at | 65/kg


Company Analysis

Global player – with good business diversification across geographies!

A quick glance at Apollo’s consolidated performance shows an increase

in contribution of the European subsidiary from FY10 onwards. Revenue

from Europe has increased from ~24% in FY10 to ~30% in FY15. The

share had dropped to 27% in FY16 primarily due to internal factors

(namely implementation of SAP impacting sales volumes, resulting in

increase in inventory and working capital) and due to external factor

(unfavourable winter season and currency movement). However, the

management remained optimistic on demand, which recovered in FY17

along with large part of internal issues sorted out thereby increasing its

share back to 30%. In terms of segment mix, replacement: OEM share

was at 77: 23 respectively. In the category mix, T&B accounts for 42% of

its revenue, PV accounts for 40% of revenue while the remaining 10%,

6%, 2% is derived from off-highway, LCV & other segments, respectively.

Exhibit 1: Revenue break-up - Geography-wise 5,037

5,490

8,158

8,507

8,712

8,938

8,682

8,934

9,902

10,655

1,990 2,234

2,850 2,992

3,943 4,032 3,284

4,091

4,403

4,740

1,097 1,183

1,308 1,502

1,271 321

-

-

-

-

-

3,000

6,000

9,000

12,000

15,000

18,000

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

(| c

rore)

India Europe South Africa


Exhibit 2: Profitability contribution - Geography-wise

661

413

499

736

930

1,106

1,346

1,179

845

976

224

298

386

432 5

57

479

256

307

97 117

-

400

800

1,200

1,600

2,000

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

(| c

rore)

India Europe



Revenue growth strong on radial TB side!

We factor in revenue growth at ~9% CAGR in FY17-19E, mainly led by

mix of both volume & value. We believe domestic demand will improve

on the back of radialisation trend in the truck bus segment. The

radialisation trend has promoted companies for higher capacity within the

segment in India. ATL’s truck bus radial (TBR) capacity is currently

operating at >90% utilisation level. Therefore, it is expanding its capacity

from 6,000 units to 12,000 units in a phased manner over the next 12-18

months. Further, the imposition of anti-dumping duty on Chinese tyres

will favour domestic tyre players (specifically ATL that is the market

leader in the T&B segment). ATL has also smartly used its nylon capacity

(that was underutilised given the radialisation trend) and is producing off-

highway tyres, which has resulted in strong growth in FY17.

Exhibit 3: We build in modest revenue growth at 9% CAGR in FY17-19E

8,868

12,153

12,795

13,413

12,785

11,849

13,180

14,253

15,592

9.2

37.0

5.3 4.8

-4.7

-7.3

11.2

8.19.4

-15

-10

-5

0

5

10

15

20

25

30

35

40

-

3,000

6,000

9,000

12,000

15,000

18,000

FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

(%

)

(| c

rore)

Sales % growth


Margins to improve from here on!

ATL’s margins have expanded from 9.6% to 15.1% from FY12 to FY15

and further increased to 16.7% in FY16 on the back of a reduction in raw

material prices. Prices of natural rubber (NR - account for ~40% of raw

material cost) declined from | 250/kg in 2011 to ~| 94/kg in February

2016. However, from its lows in February 2016, the price moved upwards

to | 159/kg in February 2017 and is currently at | 130/kg in October 2017.

According to the management, the Q1FY18 margins were impacted due

to high cost raw material procured in the past. However, with NR prices

stabilising more since May 2017 (hovering at ~| 130/kg), gross margins

are gradually expected to stabilise and improve from here onwards. In

Q2FY18, the margin looks contracted YoY. However, it has improved

QoQ and is likely to continue its momentum. The start-up cost in Hungary

is likely to impact margins in the near term. However, the same is

expected to significantly recover in FY19E. Further, a better product mix

(higher share of radial tyre) will further support margin. Thus, we expect

margins to recover in FY19E to 13.6%.


Exhibit 5: Margin movement with RM trend

58.9

58.6

57.2

56.7

56.0

52.4

56.9

50.8

53.4

49.5

49.9

49.2

51.9

52.7

57.2

59.8

58.0

13.2

16.0

14.3

13.2

14.9

15.8

16.6

17.7

16.1

17.2

16.016.3

14.2 14.4

11.1

8.3

10.5

36

40

44

48

52

56

60

64

4

6

8

10

12

14

16

18

20

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

(%

)

(%

)

Raw materials/Sales Contribution OPM (LHS)


Exhibit 6: Natural rubber prices have been volatile!

212

94

160

80

100

120

140

160

180

200

220

240

260

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

(|/Kg)

Production cut by top natural rubber

producing countries like Thailand,

Indonesia and Malaysia led to rise in

NR prices

Floods in Thailand & demand

from China led NR prices to

move northwards


Exhibit 4: EBITDA margins to recover, going forward

978

1,166

1,457

1,876

1,931

1,997

1,846

1,504

2,113

11.0

9.6

11.4

14.0

15.1

16.9

14.0

10.6

13.6

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

-

500

1,000

1,500

2,000

2,500


(%

)

(| c

rore)

EBITDA EBITDA Margins (%)



Strong capital structure in capital intensive, cyclical business!

Despite the capital intensiveness and cyclicality of the business, ATL has

managed to maintain a decent balance sheet strength. With FY16, D/E at

comfortable 0.4x levels, we believe this is the company’s greatest

strength in the good RoCE business. We believe the company has a huge

expansion plan of over >| 6,000 crore in FY17-19E, with an investment of

~€475 million in Eastern Europe over FY17-19E. For FY18E, its capex is

likely to be at | 2,500 crore, (of which an investment of ~€180 million in

Europe to serve the rising demand). For FY19E, its capex is expected to

be | 2,100 crore. To fund this huge capex, ATL on October 10, 2017

issued 6.3 crore equity share at a price of | 238/share to qualified

institutional buyers thereby aggregating | 1,500 crore. According to the

management, post this issue ATL will be in a comfortable position to

meet its major requirements and will not raise debt, going forward.

Exhibit 7: Comfortable debt position in high RoCE business!

0.8 0.8

0.7

0.2

0.0 0.0

0.3

0.2 0.3

14.8 15.1

17.6

23.2

24.7

18.8

13.6

8.4

11.8

-

5

10

15

20

25

30

-

0.2

0.4

0.6

0.8

1.0


(%

)

(x)

Nebt Debt/Equity RoCE


Exhibit 8: CFOs on up trend!

295

387

773

1,534

1,795

1,683

1,475

1,492

1,770

1,042

907

533

433

784

1,171

3,847

2,500

2,100

2,222

2,550

2,651

1,613

801 1,389

3,245

3,245

3,245

-

400

800

1,200

1,600

2,000

2,400

2,800


(| c

rore)

CFO Capex Debt



Profitability to remain at elevated levels as demand returns!

With the expected demand revival, we believe volumes will improve as

OEM demand is likely to increase, thereby driving its revenue, going

forward. Further, according to the management, the margin pressure is

likely to ease out, going forward, as the benefit of low cost inventory has

started to accrue from Q2FY18 onwards thereby supporting the

bottomline. Thus, profitability is likely to remain at decent levels, with PAT

margins likely to come in at >7% for FY19E.

Exhibit 10: EBITDA growth vs. interest/depreciation trend

978

1,166

1,457

1,876

1,931

1,997

1,846

1,504 2

,113

185

287

313

284

183

93

103

139

130

272

326

397

411

411

427

462

534

577

-

500

1,000

1,500

2,000

2,500


(| c

rore)

EBITDA Interest Depreciation


Exhibit 9: Profit margins to remain as operational improvement kicks in!

440

432

601

1,044

1,015

1,091

1,099.2

696.1 1

,123.4

5.0

3.6

4.7

7.8 7.9

9.2

8.3

4.9

7.2

2

3

4

5

6

7

8

9

10

-

200

400

600

800

1,000

1,200


(%

)

(|

crore)

PAT PAT Margin (%)

Source: Company press release, ICICIdirect.com Research


Outlook and valuation

ATL’s revenue growth remained subdued in FY15 & FY16. However, it has

seen a recovery in FY17, on the back of a demand revival in the OEM

space. The company is further investing in its TBR capacity (where its

current utilisation is >90% and there is a shift in trend from bias to radial

tyres in India). This is likely to drive its volume growth, going forward.

Similarly, in Europe, its new facility is slated to aid the current capacity

crunch faced by Vredestein coupled with strong domestic demand, which

is expected to improve in the coming years. With a decent D/E profile,

return ratios and strong operating cash flow, the company is much better

placed in this business cycle vis-à-vis previous up cycles due to its largely

diversified and global scale of business.

ATL is investing in more diversified, rapid growth areas coupled with a

larger scale of business in coming years. Going forward, the management

expects demand to recover mainly on the back of 1) good OEM demand;

2) revival in replacement demand; 3) and after domestic player are

expected to benefit from the imposition of anti-dumping duty (ADD) on

the Chinese tyre. Hence, we build in revenue CAGR of 9% in FY17-19E.

The margins are also expected to move northwards gradually thereby

driving profitability, going forward. Thus, we maintain BUY

recommendation and value the stock at 14x FY19E EPS to arrive at a

target price of | 275.

Exhibit 11: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY16 11,849 (7.3) 19.6 17.6 12.1 6.9 16.5 18.8

FY17E 13,180 11.2 19.2 (2.1) 12.3 8.7 15.1 13.6

FY18E 14,253 8.1 12.2 (36.7) 19.5 10.5 7.5 8.4

FY19E 15,592 9.4 19.6 61.4 12.1 7.7 11.0 11.8



Recommended history vs. consensus

0.0

20.0

40.0

60.0

80.0

100.0

0

50

100

150

200

250

300

350

Nov-17Jul-17Mar-17Nov-16Jul-16Mar-16Nov-15

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events

Date Event

Oct-10 Rubber prices start moving up on production concerns in Thailand on excessive rains

Aug-11 Rubber prices begin to stabilise as production picks up

Jun-13 Apollo announces Cooper Tire deal acquisition

Oct-13 Cooper deal under pressure on China labour strike

Oct-13 Cooper Tire files suit against Apollo

Dec-13 Cooper Tire terminates deal with Apollo; court dismisses Cooper appeal

Feb-14 Cooper Tire files suit against Apollo

Jun-14 Apollo to invest ~|400 crore at its Kerala facility to expand its Off-highway tyre capacity

Sep-14 Company to invest greenfield facility at Hungary and is likely to invest Euro 475 million over next 4 to 5 years

Sep-14 Apollo Tyre Africa voluntarily decides to cease its business operations

Oct-14 RBI hikes FII limit for investment upto 45% of paid up capital in Apollo Tyre

May-15 Apollo plans to invest |1500 crore to expand its Truck bus radial (TBR) capacity at its Chennai plant from 6000 units/ day to 9000 units/day

Aug-15 Board approves ATL's plans to raise debt of | 2,000 crore by way of rupee term loan, foregin currency term loan, NCDs from time to time


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Neeraj Consultants Pvt. Ltd. 30-Sep-17 0.13 72.1 0.00

2 Franklin Templeton Asset Management (India) Pvt. Ltd. 30-Sep-17 0.07 38.7 6.60

3 Apollo Finance, Ltd. 30-Sep-17 0.06 36.8 0.00

4 Sunrays Properties & Investment Company Pvt. Ltd. 30-Sep-17 0.06 36.3 0.00

5 Sacred Heart Investment Company Pvt. Ltd. 30-Sep-17 0.04 24.4 0.00

6 Templeton Asset Management Ltd. 30-Sep-17 0.03 17.9 0.76

7 Motlay Finance Pvt. Ltd. 30-Sep-17 0.03 16.9 0.00

8 Classic Auto Tubes, Ltd. 30-Sep-17 0.03 14.5 0.00

9 Mehta (Ashwin Shantilal) 30-Sep-17 0.02 13.5 0.00

10 Dimensional Fund Advisors, L.P. 30-Sep-17 0.02 11.7 0.00

(in %) Sep-16 Dec-16 Mar-17 Jun-17 Sep-17

Promoter 44.2 44.2 44.2 44.2 44.2

FII 33.0 33.4 31.6 27.3 24.6

DII 10.9 10.3 11.8 15.3 17.9

Others 12.0 12.2 12.4 13.3 13.3

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value Shares

Franklin Templeton Asset Management (India) Pvt. Ltd. 24.84 6.60 Sundaram Asset Management Company Limited -10.11 -2.55

Florida State Board of Administration 9.84 3.06 JP Morgan Asset Management -5.86 -1.48

Franklin Advisers, Inc. 9.85 2.49 Kotak Mahindra Asset Management Company Ltd. -3.05 -0.81

Amit Dyechem Pvt. Ltd. 5.02 1.56 Kanwar (Onkar Singh) -2.84 -0.80

Mirae Asset Global Investments (India) Pvt. Ltd. 5.25 1.40 Reliance Nippon Life Asset Management Limited -2.65 -0.71

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) FY16 FY17 FY18E FY19E

Total operating Income 11,848.6 13,180.0 14,253.2 15,592.1

Growth (%) -7.3 11.2 8.1 9.4

Raw Material Expenses 5,954.8 6,890.1 8,129.9 8,517.8

Employee Expenses 1,570.8 1,742.1 1,967.7 2,103.9

Other Expenses 2,325.5 2,701.5 2,651.6 2,857.6

Total Operating Expenditure 9,851.1 11,333.6 12,749.2 13,479.3

EBITDA 1,997.5 1,846.4 1,504.0 2,112.8

Growth (%) 3.5 -7.6 -18.5 40.5

Depreciation 426.8 461.8 534.5 576.9

Interest 92.6 102.9 139.2 129.8

Other Income 68.0 154.1 146.8 154.2

PBT 1,593.8 1,435.8 977.0 1,560.3

Exceptional items 0.0 0.0 0.0 0.0

Total Tax 467.7 336.5 280.9 436.9

PAT 1,123.0 1,099.0 696.1 1,123.4

Growth (%) 17.6 -2.1 -36.7 61.4

EPS (|) 19.6 19.2 12.2 19.6


Cash flow statement | Crore


Profit after Tax 1,123.0 1,099.0 696.1 1,123.4

Add: Depreciation 426.8 461.8 534.5 576.9

(Inc)/dec in Current Assets -457.6 -772.0 -16.9 -275.3

Inc/(dec) in CL and Provisions 590.8 685.9 278.3 344.9

CF from operating activities 1,683.0 1,474.7 1,492.0 1,769.9

(Inc)/dec in Investments -401.8 107.3 0.0 0.0

(Inc)/dec in Fixed Assets -1,171.1 -3,847.0 -2,500.0 -2,100.0

Others -569.4 297.6 54.4 67.9

CF from investing activities -2,142.3 -3,442.0 -2,445.6 -2,032.1

Issue/(Buy back) of Equity 0.0 0.0 6.3 0.0

Inc/(dec) in loan funds 588.6 1,855.4 0.0 0.0

Dividend paid & dividend tax -130.2 -164.5 -182.8 -201.0

Others 0.0 19.6 1,474.1 0.0

CF from financing activities 458.4 1,710.5 1,297.6 -201.0

Net Cash flow -0.8 -257.2 344.1 -463.3

Opening Cash 595.0 594.2 337.0 681.0

Closing Cash 594.2 337.0 681.0 217.7


Balance sheet | Crore


Liabilities

Equity Capital 50.9 50.9 57.2 57.2

Reserve and Surplus 6,553.7 7,239.1 9,226.5 10,148.9

Total Shareholders funds 6,604.6 7,290.0 9,283.8 10,206.1

Total Debt 1,389.2 3,244.5 3,244.5 3,244.5

Deferred Tax Liability 701.2 766.1 828.5 906.3

Total Liabilities 8,946.4 11,907.2 14,005.8 15,059.0

Assets

Gross Block 9,986.2 11,557.8 15,430.1 18,030.1

Less: Acc Depreciation 5,430.2 5,519.6 6,054.1 6,631.0

Net Block 5,057.7 6,432.6 9,770.5 11,793.6

Capital WIP 969.4 2,872.3 1,500.0 1,000.0

Total Fixed Assets 6,027.1 9,305.0 11,270.5 12,793.6

Investments 505.9 396.2 396.2 396.2

Goodwill on consolidation 198.2 177.4 177.4 177.4

Inventory 1,939.1 2,645.5 2,538.2 2,648.5

Debtors 1,084.3 1,127.5 1,210.5 1,324.3

Loans and Advances 84.7 45.0 48.6 53.2

Other current assets 398.0 460.1 497.6 544.3

Cash 594.2 337.0 681.0 217.7

Total Current Assets 4,100.3 4,615.1 4,976.0 4,788.1

Creditors 1,543.2 1,731.8 1,874.4 2,050.5

Provisions 329.2 404.3 437.6 478.7

Total Current Liabilities 1,872.3 2,136.0 2,312.0 2,529.1

Net Current Assets 2,228.0 2,479.1 2,664.1 2,258.9

Application of Funds 8,946.4 11,907.2 14,005.8 15,059.0


Key ratios


Per share data (|)

EPS 19.6 19.2 12.2 19.6

Cash EPS 27.1 27.3 21.5 29.7

BV 115.5 127.4 162.3 178.4

DPS 0.2 0.3 0.5 0.3

Cash Per Share 10.4 5.9 11.9 3.8

Operating Ratios (%)

EBITDA Margin 16.9 14.0 10.6 13.6

PBT / Net sales 13.3 10.5 6.8 9.9

PAT Margin 8.0 5.0 3.4 4.8

Inventory days 59.7 73.3 65.0 62.0

Debtor days 33.4 31.2 31.0 31.0

Creditor days 47.5 48.0 48.0 48.0

Return Ratios (%)

RoE 16.5 15.1 7.5 11.0

RoCE 18.8 13.6 8.4 11.8

RoIC 23.5 15.9 8.2 11.0

Valuation Ratios (x)

P/E 12.4 12.3 19.5 12.1

EV / EBITDA 6.9 8.7 10.5 7.7

EV / Net Sales 1.2 1.2 1.1 1.0

Market Cap / Sales 1.1 1.0 1.0 0.9

Price to Book Value 2.1 1.9 1.5 1.3

Solvency Ratios

Debt/Equity 0.2 0.4 0.3 0.3

Current Ratio 1.9 2.0 1.9 1.8

Quick Ratio 0.8 0.8 0.8 0.8



ICICIdirect.com coverage universe (Auto & Auto Ancillary)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

Amara Raja (AMARAJ) 693 870 Hold 11838 28.0 27.5 37.6 24.7 25.2 18.4 16.1 15.6 11.9 25.8 22.9 26.4 18.5 15.8 18.3

Apollo Tyre (APOTYR) 235 275 Buy 13423 19.2 12.2 19.6 12.2 19.3 11.9 10.5 10.5 7.7 13.6 8.4 11.8 15.1 7.5 11.0

Ashok Leyland (ASHLEY) 124 120 Buy 34903 4.3 4.4 6.3 28.7 28.1 19.5 13.3 12.3 9.4 23.9 25.1 29.7 25.0 18.8 22.7

Bajaj Auto (BAAUTO) 3235 3170 Hold 93598 132.3 146.8 178.2 22.0 19.8 16.3 17.6 16.0 12.6 30.3 30.4 32.5 22.5 22.3 23.3

Balkrishna Ind. (BALIND) 1753 1800 Buy 16941 74.0 80.2 105.5 21.6 20.0 15.2 13.9 12.7 9.5 23.0 23.9 26.8 20.2 23.9 26.8

Bharat Forge (BHAFOR) 710 1350 Buy 16549 29.9 39.8 47.6 23.7 17.8 14.9 21.7 14.6 12.3 16.1 22.0 26.9 14.6 17.8 21.2

Bosch (MICO) 20963 23300 Hold 65823 570.5 488.1 613.2 38.9 45.5 36.2 33.5 31.7 25.6 16.4 15.6 17.6 24.1 23.5 26.3

Eicher Motors (EICMOT) 29500 33460 Buy 83239 655.9 828.5 1026.0 47.0 37.2 30.0 27.2 21.3 17.1 39.2 38.8 36.8 36.0 33.5 31.1

Exide Industries (EXIIND) 205 250 Buy 17425 8.2 8.1 10.0 25.1 25.4 20.5 15.4 14.1 11.7 18.5 17.9 19.7 14.0 12.8 14.4

Hero Moto (HERHON) 3708 4475 Buy 74049 156.9 169.1 198.3 23.6 21.9 18.7 16.4 15.5 13.1 48.7 44.0 46.0 35.8 33.4 33.9

JK Tyre & Ind (JKIND) 146 155 Hold 3309 16.6 0.7 22.1 8.8 205.2 6.6 7.5 11.2 5.4 11.2 5.4 13.9 16.6 0.8 21.1

Mahindra CIE (MAHAUT) 253 280 Buy 9554 9.6 11.9 13.9 26.3 21.3 18.2 12.9 11.3 10.0 10.1 11.1 11.6 11.5 12.9 13.8

Maruti Suzuki (MARUTI) 8207 9150 Buy 248016 242.9 289.1 365.4 33.8 28.4 22.5 24.0 19.3 15.8 26.3 28.5 30.3 20.3 20.9 22.3

Motherson (MOTSUM) 365 335 Hold 76864 7.4 10.7 13.6 49.5 34.1 26.8 17.1 12.6 9.8 16.0 22.3 27.7 19.6 24.7 25.2

Tata Motors (TELCO) 379 490 Buy 115403 22.3 31.3 44.4 17.0 12.1 8.5 5.6 5.2 3.8 11.6 11.5 15.7 15.0 14.7 20.2

Wabco India (WABTVS) 6675 6250 Buy 12682 112.5 130.2 168.6 59.3 51.2 39.6 29.2 26.0 20.1 16.9 16.7 18.0 23.6 23.1 24.9

Sector / Company

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)



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Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

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november 3, 2017 apollo tyres (apotyr) |...

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